helplessobserver

20 Option Ideas to Protect and Profit: Financials

Very interesting, but why not buy FCS and sell an at the money strangle on FCX out to Jan10. Collect about 8 on the call and 8 on the put. If called you make about 28% in six months. Your down side protection is 15%. You can also use part of the $16 premium collected to buy put protection several points below your break even price. You need 2 puts per position first to protect your first 100 shares and another to protect against an assignment of 100 FCX stock in case of a market meltdown.

Why I Sell Put Options (Part I)

I personally like the strangle, buy the stock, sell a call on it and then sell a put, both near the money. If the stock gets called a 8-10% premium profits is gained. If the stock declines the premiums give a 6-8% discount from the buy. Below your break even price buy two out of the money puts to protect your capital. A strike on Iran will cause a 500 - 800 drop on the DJIA. I use an Excel spread sheet model to quickly compute profits, percentages and break even prices.

U.S. Credit Card Defaults Soar to Record High

It is pretty obvious the banks are running scared of their unsecured credit card lines. It is natural for people to use their last credit line to finance the household when their primary source of funds is exhausted from business slow down or job loss. In the era I grew up in the banks only lent to people who did not need money, others paid loan sharks like Liberty Loans for consumer financing. The grand experiment of every man having a line of credit is over.

Is There Any Limit to Bank Arrogance?

Most people do not know the primary mission of a bank or lender. Ask Joe Six Pac and he will say lending money is their mission. This is completely wrong. The primary mission of any lender is measuring loan credit risk. Failing this mission on a massive scale has led to the destruction of our economy. So far as I can see little of the bad debt created has been extinguished with equity holders taking the biggest hit. At some time the hit must be taken by the holders of these bad assets. Bailout money does not produce wealth, so this waste cannot go on forever. We are living is LA, LA land.

Uneasy Silence About Regional Banks

I do not know about the others, but the only solvent large bank in the Southeastern US is BBT. Residents crushed by the losses taken by the mismanagement of Wacovia and Bank of America are moving to the only good bank around. Thousands of bank jobs have been lost and these ex employees are not staying with their previous employers. CEO Kelly King has managed to keep generating earnings while doing everything possible to work out troubled loans. If he needs capital he can cut the generous dividend.

Stress Tests: Where Do CDS Fit In?

One thing we must keep in mind is the purpose of banks holding all these CDS's. Regulators allow the upgrade of a loan say from tier II to tier l capital if it is insured by a CDS. European banks began massive CDS purchases, mostly from AIG, when they realized how low the credit value was on US issued CDOs they held as capital reserves. This is why the US taxpayer paid so much money to UK and other European banks. It made the $11 billion Marshall plan outlays look like chump change.

Bank of America Punishes Customers Who Dare to Have a Balance

Every once in awhile I hear that BBT is gaining market share and now BA is throwing customers their way. Their latest 10K shows only $1.0Bn, 1% of loan assets, that cannot be marked to market. This is a small load for a bank that will earn over $500 million this year while paying an above average dividend. This $500 million is net after paying a 28% federal income tax. I wonder how much federal tax BA will pay this year?

Will the PPIP Bankrupt the FDIC?

They had better be careful how they handle the FDIC. It is the only thing that is keeping us from complete financial collapse as it is preventing a $5T - $10T run on the banks. If the public loses confidence in the FDIC and starts pulling money out of the banks capitalism and rule of law is doomed.

One Easy CDS Fix

Wow, GS has liabilities that exceed its ability to pay by 1056%. It had better not return the TARP equity injection. Such lunacy demands correction.

Rating the Top 12 U.S. Banks - From Hidden Gems to Zombies

I suspect BBT will cut its dividend to about 0.25 per share. This will inject a massive amount of capital into an already strong capital structure. On the earnings CC CEO King noted things are unusual in the banking sector and the bank has troubled assets in Washington DC, Atlanta and Florida they are focusing on. He is less worried about his builders as they are required to have "skin" in the game to qualify for construction loans. His larger worry is a higher unemployment rate and resulting larger losses in its credit card and other consumer loans books. BBT is hunkered down in a strong bunker and doing what good business is available.

BofA's Merrill Purchase: Good for America, Bad for Them

Oh, well, my wife took a $9K hit in her IRA over Wachovia so what else is new? Let's face it North Carolina is not a banking center and Ken Lewis is just a small town Georgia banker who was in way over his head. In the end BBT will be the southeast banking king, provided it does not have to soil its balance sheet doing the government favors.

Touchdown: When Do Financial Stocks Hit Zero?

Ira,
If the DJIA banks get nationalized along with other biggies, what happens to the solvent large regional banks like BBT, PNC and Comerica?

thanks,
helpless

Bank of America Has a Culture Crisis

This is a very interesting post and unveils potential big issues when any company takes on a large number of new employees from any source. I watched it happen in the '80s when a Wall Street bond trading house and brokerage powerhouse, Salomon Bros., was taken over by high flying commodity trader Phillip Bros. As the saying goes "the smart take it from the strong" and Salomon Bros eventually took over PhiBro and got out of the commodities business. Salomon, caught up in a massive government bond pricing scandal, was put out of business, its assets placed in another firm as it left Wall Street in disgrace.

Bank of America Needs More of Your Tax Dollars

What happens if BAC shareholders vetoes the merger with BAC? MER is as sick as C and will need life support.

What Are Some of the Best Hedge Fund Managers Doing?

I like Simon's portfolio the best. He knows all the mathematical skills in the world cannot predict future stock prices for marginal companies. Solid companies with deep markets and pricing power are more amenable to statistical analysis